Financial Analysis: POSB Bank's Operations, Six Sigma & TQM Strategies

This report provides a comprehensive analysis of POSB Bank, a subsidiary of DBS Bank Limited in Singapore. It begins with an overview of POSB's business operations, detailing its financial products and services categorized into liability and asset groups, including savings accounts, loans, and investment services. The report then identifies key customer segments (business and individual) and suppliers (MasterCard, mobile app developers), along with its main competitors in the Singaporean banking market, such as OCBC Bank and UOB. Furthermore, it applies the Enterprise Singapore Business Excellence Framework to assess POSB's strengths and weaknesses, highlighting areas for improvement. The core of the report focuses on applying Six Sigma and Total Quality Management (TQM) to enhance key areas like reducing accounts receivable aging and improving customer response time. It proposes the use of DMAIC methodology, process mapping, fishbone diagrams, and Pareto charts to identify and address quality issues, ultimately aiming to improve loan recovery and customer satisfaction. The report concludes with a discussion on the importance of lean six sigma applications to deal with losses due to poor quality of loan recovery and a section on a PPT presentation.

Running head: BANKING
BANKING
Name of the Student:
Name of the University:
Author Note:

Section A.
Answer 1.
Part a. Description of the business operations and services provided by the organisations:
POSB Bank is a bank based in Singapore and subsidiary to the Singaporean multinational
bank DBS Bank Limited. The bank operates under the leadership of Peter Seah Lim Huat as its
chairman and Piyush Gupta as its CEO. The operations of the POSB Bank range of selling of a
wide variety of financial products both of liability and asset categories.
The main services which POSB offers can be divided into liability and asset groups. The
liability products include saving accounts, current account and debits. The asset products of the
bank consists of credit cards, home loans, personal loans, car loans and educational loans. The
allied products of the bank include investment products and insurance. The investment services
portfolio of the bank consists of unit trusts, equities, forex, fixed income and structured deposits.
The products of the bank also include digital banking services, fund transfer and ATM services.
Part b. Key customers, suppliers and competitors for the services of this organisation:
Key Customers:
The key customer segments of POSB can be divided into business customers and
individual customers. The business customers of the bank can avail current account products of
the bank which enable them to carry on their business transactions. The domestic customers can
be avail savings accounts. The bank again divides its domestic customer base into four broad
divisions namely, saving accounts for adult people, savings bank account for children, savings

bank account for senior citizens and for foreigners. The account holders can also avail fixed
deposit facilities both in SGD and foreign currency.
Key suppliers:
The key suppliers of POSB Bank are firms which provide it with products which the
bank markets under its own brand name. The firms like Master Card providing the bank with
debit cards are one of the most strategic suppliers. The firms which develops the mobile app and
the net banking platforms which the bank markets among its customers are important suppliers.
The agents of the bank provide it with customers and enable it to gain deeper market penetration.
Thus, it is clear that POSB Bank serves a wide chain of suppliers which provide it with the
products like mobile banking app which the formers markets under its brand name.
Competitors:
POSB Bank has to compete with a numerous financial organisations to hold its position
in the economically booming market of Singapore. The bank faces stiff competition in Singapore
both from local banks and as well as foreign banks. The main banks based in Singapore which
pose threat to the market position of POSB Bank are Bank of Sinapore, OCBC Bank Limited and
United Overseas Bank Limited. The market of Singapore owing to the economic advancement
and profitability has attracted a large number of commercial banks from both developed as well
as emerging countries. For example, HSBC Bank Limited and JP Morgan Chase Bank are based
in the UK and the US respectively. State Bank of India, Bank of China and Sumitomo Mitsui
Banking Corporation are based in India, China and Japan respectively. This presence of large
number of resident as well as foreign banks in the country places a strong challenge before
POSB Bank. POSB Bank also has to compete against companies marketing allied financial

products like demat accounts, loans and insurance products. The indirect competitors of POSB
also include the unorganised money lender sector.
Part c. Self-assessment tool based on the Enterprise Singapore Business Excellence
Framework:
The Enterprise Singapore Business Excellence Framework is a framework as shown below is
a framework which enables the business organisations align their strategies and goals to their
business objectives so as to gain sustainability in the market. The companies in Singapore use the
framework to recognise their strengths and identify their weaknesses on which they can improve.
Figure 1. Excellence framework
(Source: Enterprisesg.gov.sg. 2019)

S/N Statement 5 4 3 2 1 Justification for the
rating
Counter-
measures
1
Leadership:
Senior leaders
have developed a
clear vision and
mission which are
clearly
communicated to
its stakehoklders 5
The bank in spite of
being subsidiary to
DBS Bank has
succeeded in
capture high
position in the
banking market in
Sinagore which
shows that strong
leadership qualities
of the apex
management
X
2 Strategy:
The organisation
develops strategies
to achieve
organisational
goals 4
The bank in spite of
being subsidiary to
DBS Bank has
succeeded in
capture high
position in the
banking market in
Sinagore which
shows the strategy
making power of the
apex management
X
3
People:
The organisation
develops and
aligns human
resource plans to
achieve
organisational
goals 5
High employee
retention and
market position of
the bank
X
4
Knowledge:
The organisation
uses benchmarking
to improve
organisational
performance 5
High profits and
market position X

Answer 2.
Part a.
POSB can use six sigma to improve quality on two areas of business operations namely,
reduce accounts receivable ageing and improve customer response time. The bank in order to
apply six sigma to improve these area should use PZ & B service five quality dimensions. The
five dimensions of PZ&B service are tangibles, reliability, responsiveness, assurance and
empathy. The following are the ways in which POSB can apply six sigma technique in the
selected areas of business:
Reduce accounts receivable ageing:
POSB in order to reduce the accounts receivable ageing should form a strategy which
would enable the bank to recover the loans from customers faster. Svensson et al.(2015) define
the term six sigma as the strategy which business organisations can adopt to improve the
production of output by identifying and removing the causes of defects within the manufacturing
process. In this case, it can be pointed out that organisation chosen is POSB Bank and hence
production of goods is analogous to provision of financial services to customers. The bank in
order to provide loans to appropriate customers. Sudhakar and Reddy (2016) point out that loans
and credit cards are asset products which banks provide their customers to generate revenue both
in the form of interests as well as principle amount lend. Thus, in this case it can be pointed out
that loans and credit cards enable banks to generate huge revenue from customers or debtors.
Seira, Castellanos and Hernández (2015) contradict the opinion of the previous authors by
pointed out that debtors default or delay payment of loan amounts. This in turn create credit risks
for the bank. Non-recovered loans add to the bad debts which the banks suffer. Fuster and Willen

(2017) point on in this respect that due to falling net present value of currency, the banks upon
recovering ageing debts are not able to reap similar benefits on investing the amount in the
market. Moreover, ageing debts reduces the liquidity in the bank causing cash crunch. Thus, it is
evident that the management of POSB Bank should take steps to reduce ageing debts by using
six sigma.
Improve customer response time:
POSB should take steps to improve customer response time. Lim et al. (2017) mention in
this respect that the sale of products in banks are dependent on the customer response time.
Prompt customer response enables banks to sell products to customers and generate higher
revenue. However, it can be pointed out that banking personnel dealing with the customers often
do not maintain strong communication with customers. This results in customers developing
negative image about the bank which in turn prolongs the response time. Fang and Zhang (2016)
mention in this respect that if the employees of the bank do not maintain continuous
communication with the customers, it often gives opportunities to competing banks to approach
customers and establish a strong relationship with them. This in fact allows the latter to acquire
the customers by the virtue of the trust which is created between the bank and the customer
based on continuous communication. Thus, it is clear that POBS has to implement six sigma in
order to reduce or improve customer response time.
Part b.
POBS should use total quality management as the six sigma to evaluate the application
of project charter. The problem identified is ageing accounts receivables from the borrowers of
loan. This delay in recovery of loan often results in bad debts which reduces the revenue

generation of the bank. The problem defined in this case as per the DMAIC(define, measure,
analyse, improve and control) would loss which POBS incurs due to either late or non-recovery
of the amounts due on loans. The business case would be ’Banks incur credit risks due to late
recovery of loans and bad debts.’ The goal statement would be to use six sigma technique,
namely, total quality management to ensure quicker recovery of amount lent as loans to debtors.
The project scope would include the two asset products banks offer to customers namely, loans
and credits.
Part c.
The management of the POBS Bank should three lean six sigma applications to deal with
the losses it incurs due to poor quality of loan recovery.

Process mapping:

The process mapping enables business organisations to map the steps or processes which
lead to marketing goods and services in the market. As far as POBS is concerned, the bank can
use process mapping to view all the steps which go into providing loans and credit cards to
customers as well as recovering them. The management should consider each step and identify

Customer applies
for loan/credit
cards
Submits
documents Bank
analyses the
documents
Customer qualifies?Y
Bank ground
verification by
bank official
N
Rejected
Customer qualifies?
Y
Loan disbursed
the areas of weaknesses in which it can bring about improvement. For example,

Figure 2. Process map showing disbursement of loan
(Source: Author)
For example, the process map shown above outlines the steps which go into disbursing
loan and credit cards to customers or debtors. It can be pointed out here here that the
management of POBS should consider each step and find out flaws, if any. Then it should form
strategies to rectify the weak areas.
Fishbone diagram:
The companies should use fish bone diagram to analyse the problem(s) identified using
the process mapping shown above. For example, the management of the POBS Bank identifies
that background verification of many previous loan cases were faulty. The customers who were
allowed loans and credit cards could not pay back the debts to the bank owing to bankruptcy.
Thus, in this case the management should restructure its customer verification policies. The bank
can also adopt the strategy of sending higher officials with more experience of customer
verifications and carrying on multiple verifications in order to proceed to the next step to
disbursing the loan or credits.

Poor imbursement of debts
outstanding on loans and
credit cards
Defective verification of
documents
Defective physical
verification of clients
Lack of proper customer
credit risk analysis
Lack of assessment of
financial capability of
customers
Figure 3. Fish bone diagram of POBS Bank
(Source:Author)
Pareto chart:
Pareto chart can be used to ranking the problems which would lead to outlining
appropriate strategies to deal with the issue(s). For example, the bank identifies the two issues
namely bank’s analysis of documents before loan and credit disbursement if faulty and secondly,
the verification process is faulty. The bank then identify the cases in which each of the faults
have happened. It then take steps to deal with those faults, thus applying six sigma.

Issue No of issues Cummulative (%)
0
10
20
30
40
50
60
70
94
96
98
100
102
104
106
108
110
112
Pareto chart showing issues faced by POBS Bank
Series1 Series2 Series3 c
Figure 4. Pareto chart
(Source: Author)
Section B. PPT presentation

References:
Enterprisesg.gov.sg. (2019). Retrieved from
https://www.enterprisesg.gov.sg/-/media/esg/files/quality-and-standards/business-
excellence/be_framework.pdf?la=en
Svensson, C., Antony, J., Ba-Essa, M., Bakhsh, M., & Albliwi, S. (2015). A Lean Six Sigma
program in higher education. International Journal of Quality & Reliability
Management, 32(9), 951-969.
Sudhakar, M., & Reddy, C. V. K. (2016). Two step credit risk assessment model for retail bank
loan applications using Decision Tree data mining technique. International Journal of
Advanced Research in Computer Engineering & Technology (IJARCET), 5(3), 705-718.
Seira, E., Castellanos, S. G., & Hernández, D. J. J. (2015). Bancarizing with credit cards:
Experimental evidence on interest rates and minimum payments elasticities for new
clients (No. 2015-11). Working Papers.
Fuster, A., & Willen, P. S. (2017). Payment size, negative equity, and mortgage
default. American Economic Journal: Economic Policy, 9(4), 167-91.
Lim, C. Y., Woods, M., Humphrey, C., & Seow, J. L. (2017). The paradoxes of risk management
in the banking sector. The British Accounting Review, 49(1), 75-90.
Fang, B., & Zhang, P. (2016). Big data in finance. In Big data concepts, theories, and
applications (pp. 391-412). Springer, Cham.